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May 25, 2016

Samsung has teamed up with Alibaba’s affiliate Alipay to integrate Alipay into its Samsung Pay service. The move comes two months after Samsung Pay’s launch in China. The partnership will allow Samsung Pay users to pay with their Alipay accounts in store on compatible devices.

Samsung Pay users need to register their Alipay account details into Samsung Pay and swipe upward from the lock-screen to bring up their Alipay QR code for merchants to scan. This is in addition to Samsung Pay’s proprietary, Magnetic Secure Transmission (MST) technology which means Samsung Pay can be used on three types of terminals in China: QuickPass POS terminals with NFC, traditional POS terminals without NFC technology, and also QR code scanners.

Samsung Pay is currently only available for a limited range of recent high-end Samsung smartphones and so has a much smaller addressable market than the device agnostic Alipay. Apple Pay has also recently launched in China; IHS estimates that there are round seven times more active Apple Pay smartphones in China than those that support Samsung Pay. Both Apple and Samsung’s addressable audience is dwarfed by their bigger domestic Chinese rivals. Alibaba is one of the dominant mobile payments services in China with 410 million mobile monthly active users in Q1 2016. Samsung Pay’s strategy shows that it needs to partner with potential competitors to gain user adoption and is a significant step to further extend its availability among Chinese users.

Samsung aims to promote its latest high-end devices in China

The partnership between Samsung Pay and Alipay is a combination of device-based and OS-agnostic mobile payment services. It could provide Samsung with a new revenue stream, but the main immediate purpose is to help sell the latest high-end devices. Partnering with Alipay makes the service – and therefore Samsung devices – more attractive to potential customers. Making Alipay accessible from the lock-screen on supported Samsung devices shows how tightly integrated it will be and means that Samsung Pay does not present an immediate risk to Alipay.

Alipay is the key to connect with 173 local financial institutions in China

In order to maximise adoption by Chinese users, it is integral that Samsung Pay has a solid foundation of partners upon launch of the service. These include financial institutions, retailers, and payment platforms.

Samsung Pay’s collaboration with Alipay extends its reach to Alipay’s partner-network; it marks the real entry into the Chinese mobile payment market. Alipay currently has deals with 173 local banks, 14 international banks, four international financial institutions, and six third-party payments organisations. In contrast, Samsung Pay entered into China with the support of 11 local banks. Alipay’s scale of industry and user support shows how important a partner it is for Samsung. Alipay is the bridge to connect Samsung Pay with these domestic banks and international financial institutions in China.

Samsung has also partnered with other Chinese companies to boost adoption

Samsung partnered with Tencent for a promotional campaign in China that rewarded Samsung Galaxy 7 Edge users with a RMB 200 WeChat voucher when they registered their bank cards with Samsung Pay. This was more a promotional campaign than a deep partnership that integrated the two companies’ services.